Auto Club Continues To Have Concerns About Increasing Car Taxes

Budget Deficits and the Car Tax

Californians pay among the highest fees in the country to keep their cars registered. In the few states in which the fees are higher, including neighboring Nevada, there are little or no state income taxes.

The “car tax” is actually comprised of two fees-a registration fee and a vehicle license fee (VLF). The registration fee now exceeds $80 in most counties and is primarily used to fund the Highway Patrol, the DMV, and air pollution-mitigation programs.

The VLF takes the place of a property tax and is assessed on the value of the vehicle according to a state schedule. After the DMV deducts a portion of the revenue to reimburse the agency for the administrative cost of collecting the fee, it transfers the bulk of the money to the cities and counties. There are no restrictions on how local governments may use the funds, with many spending them on police and fire services, road maintenance, and other local services. Last year, as part of the state budget, the legislature raised the VLF, although voters rejected making the increase permanent in a May 2009 special election.

The car tax can now amount to several hundred dollars, even for older vehicles, and can be much higher for newer vehicles. As a result, many unemployed and underemployed people who need their cars to seek employment will have a more difficult time keeping their vehicles legally registered.

Once again, we are seeing numerous proposals to raise the car tax as part of the debate in the impasse on the state budget. In addition, there have been many “single interest” ideas to increase car taxes and add registration fees to pay for parks, libraries, trauma centers, and other similar purposes. Raising taxes or adding fees in this manner bypasses the state’s budget prioritization and accountability process, while restricting funding to a single interest. In such cases, the funding could not be used for other high-priority needs, such as helping to balance California’s budget.

If voters approve the types of ballot initiatives that rely on increasing car taxes to fund such measures, single-interest groups will see the trend as an easy path to higher taxes, and even more initiatives are likely to follow. Instead of adding single-interest fees to the car tax, we need to urge Sacramento to enact real budget reform, accept the fact that we must learn to live within our means, and, above all, improve the economy to get Californians back to work.

Thomas V. McKernan, Chief Executive Officer, Automobile Club of Southern California